Budget Discussions, Part II

Trent Ernst, Editor

 

At the start of the second round of discussions on capital projects, accountant Clive Freundlich gave an overview of the finances and the broader picture of what the purpose of governance is.

It’s about the infrastructure, says Freundlich. $80-million worth of infrastructure, to be precise. That’s the cost of everything around town: roads, sewers, buildings, etc. With each passing year, though, that infrastructure ages and needs to be replaced or replenished. Or at least, that’s what it would be valued at if it were all new and in top shape. The current value of the infrastructure has depreciated to $50-million.

Tumbler Ridge is in good financial position, he says, but the infrastructure is all aging at the same rate, so the town needs to start planning on how to be in the financial position to deal with that.

What has happened over the last number of years, he says, is reserves have been established to help deal with many of these costs that will be more expensive. “The process of planning is important,” says Freundlich, “and the budget is the single-most important document that will come across council’s table.”

Tumbler Ridge has about $6.7 million in nine statutory reserves, he says. For each of these, there is a bylaw as to how much District puts in and how to take money out. The largest of these reserve funds is the Machinery and Equipment reserve which has $2.239 million.

Some of these reserve funds don’t have an obligation to put funds in each year.

Every year, the District brings in about $15-million. The lion’s share of this, he says, is property value taxes, at 73 percent. Fees for recycling, etc., bring in another 10 percent or so.

Despite the idling of the mines, the revenue outlook for 2015 is looking good, says Freundlich. The actual revenue in 2014 was about $316,000 more than expected. This was made up in fees, not property taxes, which are basically fixed by the tax bylaw.

In fact, says Freundlich, the amount of income is not really dependent on the assessed property value, as that amount is basically fixed. If all the property values go down ten percent across the board, the tax bylaw will adjust the amount of taxes so revenue stays the same. If all the property values go up the revenue stays the same, too, with just a minor increase to cover inflation. “The purpose of assessment is to determine how to allocate the tax burden across all the properties.”

In the case of delinquent taxes, he says, after three years, the District can auction that property off. The revenue might be delayed, he says, but it will be paid. This is legislated by the provincial government, and Council doesn’t have the authority to change that.

In addition to the other sources of income, the District will be receiving about $2-million in fair share this year, about half a million more than last year.

Mayor McPherson asks if there is a point where the District could have too much money in reserves? Freundlich says that the infrastructure has lost about $30-million in value. Asset management and planning is important. Staff’s job is to figure out how to maintain the infrastructure, so it would be surprising to be in a state where there was too much in reserves. And if the question is will the amount of money we have in reserves affect the District’s ability to get grants, no, those are not based on reserves.

Councillor Scott asks what implication the mine closures and CN Rail pulling out have?

In order for major industry to change from that class to a lower class of taxes, they have to have filed a Closure of Business form by October of the previous year, and the president would have to send a letter saying they are closing down and never opening again. While there was some discussion, nothing happened. The mines will be taxed at the same rate this year.

And it’s not just the mines. There are 70 properties in major industry, providing about $5 million in taxes. Most municipalities are lucky to have one major industry. In towns like that, the residents are on the hook to cover most of the tax base.

With discussion starting on Fair Share, staff needs to identify what projects are applicable to infrastructure programs and covered under Fair Share. Freundlich suggests a statutory reserve for Fair Share overages.

The conversation turns to the core services budget, at about $8.4 million. At end of last year there were three departments that were under budget on core budget. This might sound like a good thing, says Freundlich , but it can hint that there were too many capital projects and not enough core spending. “For instance, the Community Centre spent under on its maintenance costs,” he says. “This is not a good news story, or it might not be. What didn’t get done as a result?”

Also under budget was public works and economic development, though that’s a new department.

The District is building a new budgeting model, he says, which will allow managers to do more work in core services. “In the past, managers would submit capital requests in budget document,” he says, “but when it came to core services, those calculations were done by the finance department. This leads to a disconnection. Since the last budget process, we’ve been building a budget workbook program that forces managers to look at core budget and go line by line through their past four years, then project five years ahead. When it comes time to do a core service review, Council will have lots of information. Finance is now dealing more with consolidation of the budget, and not so much data entry. I think it’s being received well by the managers.”

And that, says Freundlich, is a snapshot of the District’s financial position.

The discussion changes to special projects.

CAO Barry Elliot says since the last time Council looked at the budget, there have been some changes. “We’ve removed a couple items,” he says. “The $50,000 council initiatives contingency, for instance, has been moved to core budget. We have also removed $41,000 from the sustainability plan, which was a duplication.

Councillor Caisley asks about implementation of sustainability plan. “There’s a whole lot of work that’s going to happen in Economic Development, and we need to know that’s reflected in the budget.”

Elliott says this will be reflected in the Core budget.

Added to the budget are things like Line Painting, the Water Regulation bylaw, and the Sewer Regulation Bylaw. There are 13 new items that have been added from discussion with Council. “Right now these have a $1 budget, just so it is in the budget and can be found.”

Finally, says Elliott, there’s lots of new information around the golf carts, after the last meeting.

One of the items on the list is money for playground upgrades. Councillor Howe says he’d rather see $200,000 put into the proposed water park, which has been on the books for a number of years, rather than putting that into playground upgrades.

Councillor Kirby says the water park plaza idea came up when the skate park was built. She asks why it was pushed back.

Operations Manager Doug Beale says he was sitting on Council when that discussion happened. He says the recreational manager was looking at it at the time, but not sure why it was pushed back.

Elliott says he’s been involved in these things before. If Council is eager to move this forward, he suggests allocating an amount of engineering and evaluation. He says he doesn’t have a dollar figure on what that would cost, but it would be smart to get the engineering and design work done this year, and move into construction next year.

Councillor Scott says she agrees, but cautions that some of the playground equipment was in dire need of replacement. She doesn’t want to see anyone getting hurt.

Beale says that a lot of the equipment at the smaller parks is obsolete, and they can’t replace parts. Some is in fairly good condition, but of the four parks in this year’s budget, some of the equipment will have to be removed, if it can’t be replaced.

Elliott says one member of staff is a certified playground inspector. “The requirement is any equipment in these parks meets current CSA standards,” he says. “Much of this equipment is so old as to be out of date. These are based on her recommendation.” He points out, though, that he suspects that much of the planning and engineering work would probably be covered by the supplier looking to get the contract for the job.

Councillor Kirby says she likes the idea of splash park, as does Councillor Mackay, but if we are going to be following the advice of the sustainability plan, he says, then council should look at these recommendations. “We don’t want to lose something to gain something else,” he says, but points out he is in favour of both, as both would make the community better.

Aleen Torraville says there is a conceptual plan that has been done in the past, and will see if staff can dig it up. Council pushes to move this forward.

Councillor Howe asks what the plan is for the signpost in the Roman Walkway. “In my opinion, it looks ugly and should be yarded out of there.”

Elliott says Joan Zimmer has redone the animals and mileage indicators, but they haven’t been put back up. That was commissioned two years ago, but she had some medical issues.

Councillor Krakowka says he thought there was some discussion of moving the post to the new VIC. He says he’d like to see it moved.

Mayor McPherson says he can get the animal signs in here for next meeting. He says they look great.

Councillor Krakowka asks what the cost of the commercial water metering has been to this point? So far, says Freundlich the district has spent $27,000, and the amount in the budget is largely carry-forward.

Elliott draws Council’s attention to line item 66. “Council will recall that last time there was discussion about converting to chlorine pool,” says Elliott. “Money was put in there in hopes of getting it done during the current shutdown. However, since that time, there’s been a lot of controversy, so instead of moving this forward so quickly, staff is proposing that we take the time to look at the design. This will give us time to look at options, and Council time to hear the concerns of these people.”

“So we won’t be taking action this year?” asks Councillor Caisley.

“We still have to do maintenance,” says Elliott, “but if the design work says we can do something better with a salt system or with a chlorine pool, we’ll defer that to the 2016 budget.”

The mayor asks about the $60,000 price tag for engineering. Elliott says we’re not sure it has to be quite so high, as we haven’t gone back to the engineers to get a firm quote. The mayor asks if a construction company will do the work without an engineer. Building manager Ken Klikach says that’s not in the best interest of the District to do it that way. He also points out the $60,000 price tag as for a number of projects around the Community Centre.

Another new item added to the budget is repairs to the Trip station. Councillor Howe asks what a trip station is. Beale says it is the small round building on top of Flatbed hill that pumps water to the storage station. It needs work, he says, as there are some safety issues.